Trump's Business-Friendly Appointments Boost Bank and Investment Firm Stocks, Investors Hope for Lighter Regulations and Increased M&A Activity

President-elect Trump is expected to appoint business-friendly leaders to key government agencies and reduce regulatory burdens, which is good news for banks and dealmakers. This has led to a surge in stock prices for banks and alternative investing firms due to the anticipation of lenient regulations. Smaller banks have also seen a boost, with the KBW Regional Banking Index up 10% in just three days. The expected lighter capital requirements will help banks make more loans and earn more interest, while an increase in M&A activity would bolster capital markets profits for Wall Street’s largest investment banks.

Gary Gensler, the chair of the SEC nominated by Joe Biden, has been targeted by former President Trump due to his adoption of new rules on ESG reporting and stricter SPAC disclosures. Gensler's hard line on digital assets has also led to lawsuits against exchanges Coinbase and Kraken. Capital markets partner Christian Nagler predicts stricter adherence to SEC registration statement review timelines, which have become longer in recent years. Despite a slowdown in the IPO market in 2021, Nagler notes that the number of IPOs typically increases in the four years following a presidential election year, and the SPAC market has already started to rebound this year.